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ECON March 18, 09
Stack #221135
| Question | Answer |
|---|---|
| National Income Accounting | measures the economy's overall performance: 1. Assess the health of the economy by comparing levels of production at regular intervals 2. track the long-run course of the economy to see whether it has grown, been constant, or declined. |
| National Income Accounting (cont) | 3. Formulate policies that will safegaurd and improve the economy's health. |
| Intermediate Goods | are goods and services that are purchased for resale for further processing or manufacturing |
| Final goods | are goods and services that are purchased for final use by the consumer, not for resale or for further proccessing or manufacturing |
| Multiple Counting | would include the value of intermediate goods, and would distort the value of GDP |
| value added | the market value of a firm's output LESS the value of the imports the firm has bought from others. |
| Nonproduction Transaction | does not involve final goods and services 1. Public transfer payments 2. Private transfer payments 3. stock market transactions |
| expenditures approach | The sum of all money being spent in buying GDP |
| income approach | the income derived or cread fom producing GDP |
| Personal Consumption Expenditures (C) | All expenditures by households n durable consumer goods, and nondurable consumer expenditures for services. |
| Gross Private Domestic Investment (Ig) | -All final purchases o machinery, equipment (investment in replacement capital AND added capital) and tools by business enterprises -all construction -changes in inventories |
| Net Private Domestic Investment | includes only investment in the form of added capital |
| Net Investment = | Gross Investment - depreciation |
| Government Purchases (G) | 1. Expenditures for goods and services that government consumes in providing public services 2. expenditures for social capital such as schools and highways |
| Net Exports (Xn) | exports (X) - imports (M) |
| (Expenditures Approach) GDP= | C + Ig + G + Xn |
| National Income (NI) | The sum of employee compensation, rents interest, proprietors' income, corporate profits, and taxes on production and imports. |
| Corporate Profits | 1. Corporate Income Taxes - taxes that are levied on corporations' net earnings and flow to the govt 2. Dividends - the part of corporate profits that are paid to corporate stockholders. 3. Undistributed corporate profits - retained earnings for later. |
| Taxes on Production and Imports | include general sales taxes, excise taxes, business property taxes, license fees, and customs duties. |
| Consumption of fixed capital | it is the allowance for capital that has been consumed in producing the year's GDP (A cost of production and thus included in the gross value of output) |
| Net Domestic Product (NDP) | GDP - consumption of fixed capital (depreciation) |
| Personal Income (PI) | includes all income received whether earned or unearned. |
| Nominal GDP | A GDP based on the prices that prevailed when the output was produced. |
| real GDP | A GDP that has been deflated or inflated to reflect changes in the price level. |
| price index (/in hudredths) | a measure of the price of a specified collection of goods and services, a "market basket." nominal GDP/real GDP |
| PI = | (price of market basket in specific year/ price of market basket in base year) * 100 |
| Real GDP | nominal GDP / price index (in hudredths) |
| economic growth | -an increase in real GDP (per capita) occuring over some time period |
| real GDP per capita | real GDP / size of the population |
| Rule of 70 | A mathematical approximation that provides a quantitative grasp of the effect of economic growh. We can find the number of years it will take to double GDP. = (70/annual percentage rate of growth) |
| productivity | measured broadly as real output per unit of input. |
| GDP Growth Benefits | -Improved products and services -Added Leisure -Other Impacts |
| Business Cycle | alternating rises and declines in the level of economic activity |
| Peak | When Business activity has reached a temporary maximum. (full employment, level of productivity at max.) |
| recession | a period of decline in total output, income, and employment |
| trough | Recession or depression, when output and employment "bottom out" at their lowest levels. |
| Expansion | A recovery post-recession, in which real GDP, income and employment rise. |
| labor force | consists of people who are able and willing to work. |
| unemployment rate | = (unemployed/ labor force) * 100 |
| Objects of Criticism, The Unemployment Rate | -Part-Time Employment -Discouraged Workers Insated by the BLS, statistics said to be understating |
| BLS | Bureau of Labor Statistics |
| frictional employment | workers who are eiher searching for jobs or waiting to take jobs in the near future. |
| structural unemployment | Changes over time in consumer demand and in technology alter the "structure" of the total demand for labor, both occupationally and geographically. |
| Cyclical Unemployment | unemployment caused by a decline in total spending. |
| Full-Employment Rate of Unemployment or the Natural Rate of Unemployment (NRU) | (potential output) Occurs when the number of job seekers equals the number of job vacancies. |
| GDP Gap= | actual GDP - potential GDP |
| Okun's Law | for eery 1 percentage point by which the acutal unemployment rate exceeds the natural rate, a negative GDP gap of about 2 percent occurs. |
| Unequal Burdens | -Occupation -Age -Race and Ethnicity -Gender -Education -Duration |
| Consumer Price Index (CPI) | compiled by the Bureau of Labor Statistics (BLS). The government uses this index to report inflation rates each month and each year. Also adjusts Social Security benefits and income tax brakets for inflation. |
| Inflation | Rise in the general level of prices. When inflation occurs, each dollar of income will buy fewer goods and services than before. |
| CPI= | (price of the most recent market basket in the particular year/ price estimate of the same market basket in 1982-1984) * 100 |
Created by:
wheezylou